Aviva is considering selling a chunk of the billions of pounds worth of UK
pension assets it owns as it looks to boost the amount of capital it holds
on its balance sheet.

The FTSE100 insurance group is exploring whether to raise funds by offloading some of its so-called back book of annuities – policies that provide retirement incomes to pensioners.

Aviva

Potential bidders could include industry consolidators such as Pension Corporation or Rothesay Life, part of Goldman Sachs.

Although the plans are believed to be at an early stage, it is understood the company is only prepared to sell some of the annuity assets, rather than the entire portfolio, which is worth several billion pounds, insiders say.

The plan is one of many under consideration but according to analysts would be a cost-efficient way of protecting itself against Europe's sovereign debt crisis and in preparing for Solvency II, new capital rules set to govern the European insurance industry.

Last month, Aviva saw its regulatory surplus capital fall from £4bn at the end of June to £2.7bn. At the time, the company said this was impacted by "market movements", with widening credit spreads accounting for about £700m and a further £400m reduction caused by falling equity markets.

Aviva declined to comment on the potential sale of annuity assets. However, a spokesman added: "As with any insurer, we regularly look at various options to optimise our capital position such as reinsurance or securitisation."

Over the past few years, Aviva's chief executive Andrew Moss has looked to simplify the group's global structure. The insurer has plans to focus on 12 core markets and has looked to remove costs and pay down debt. Last month, Aviva announced plans to halve its Irish workforce at a cost of 950 jobs.

Despite this, the company's shares remained hit by the current economic crisis.

One industry insider said: "The concept is simple. Insurance companies invest annuity funds and make a margin on their investments. Selling parts of the back book for a discounted cash payment means it gets capital now rather than having to wait for the duration of the policy."